Introduction and Summary

Unemployment insurance, or UI, has been a pillar of our nation’s social insurance system for 80 years. It is an essential ingredient for economic security, shared prosperity, and a stable economy. Designed as a partnership between the federal government and the states,1 it is a critical support for unemployed jobseekers: UI temporarily replaces a share of lost wages for unemployed workers while they search for a new job. To be eligible for UI benefits, workers must have sufficient earnings history, have paid into unemployment insurance via their employer’s payroll taxes,2 have lost a job through no fault of their own, and be actively seeking work.

UI protects families from hardship. But it also helps to stabilize the economy during downturns by boosting the spending power of struggling families and creating demand in the economy. In part because of significant, temporary improvements, the UI system once again proved to be essential during the Great Recession, both to family economic security and to our nation’s economic health. In 2009 alone, UI kept more than 5 million Americans out of poverty3 and saved more than 2 million jobs by boosting demand in a sagging economy.4 Between 2008 and 2012, UI prevented an estimated 1.4 million foreclosures,5 and from 2008 to 2010, it closed more than 18 percent of the shortfall in gross domestic product, or GDP.6

However, our nation has dramatically underinvested in UI and has failed to update this vital system for the 21st century. In 2015, only about one in four jobless workers received UI benefits at all—a historic low.7 This erosion of one of our nation’s most important social insurance programs is not only problematic for workers, it also leaves the U.S. economy severely underprepared for the next recession. Only twice since 1860 has the United States gone more than eight years without a downturn—and 2016 marks the seventh year of economic expansion.8 The next recession—while unpredictable—is inevitable, and experts are already pressing policymakers to prepare.9

To protect more working families from the risk and hardships of unemployment, policymakers should act now to fortify the nation against the next recession. America must ensure a robust employment, training, and income-security system for involuntarily unemployed workers by substantially strengthening UI. Further,our nation must also help the many jobseekers who will not qualify for traditional UI—even under a modernized UI system—to actively seek employment, connect to job opportunities, and improve their work-related skills.

To this end, the Center for American Progress, or CAP; the Georgetown Center on Poverty and Inequality, or GCPI; and the National Employment Law Project, or NELP, came together on a proposal to modernize the nation’s system for assisting unemployed jobseekers. This report proceeds in two distinct sections.

Section 1 proposes ambitious, but strongly needed, reforms to UI. This includes bolstering UI’s effective re-employment services to connect more jobseekers with workforce development opportunities and strengthening tools such as work sharing that help workers stay in the jobs that they already have. It includes detailed reforms to expand UI eligibility to reach more unemployed workers, improve the adequacy of UI benefits, and increase participation in the program. In addition, this section recommends reforms to UI’s financing that would improve the program’s solvency, as well as steps that would improve UI’s ability to respond to future recessions, including repairing the Extended Benefits program.

In Section 2, the report recommends the establishment of a new Jobseeker’s Allowance, or JSA, for workers who would remain ineligible for UI. This section describes the need for a modest, short-term benefit that would assist jobseekers such as unemployed independent contractors and those with limited work history. The report lays out eligibility criteria for the JSA, characterizes the moderate but important benefits and services the JSA would provide, and outlines the administration and financing of the proposed program. Finally, the report briefly describes the anticipated costs of the proposal, including both reforms to UI and the new JSA.

Rachel West is an Associate Director for the Poverty to Prosperity Program at the Center for American Progress. Indivar Dutta-Gupta is Director of the Project on Deep Poverty and Senior Fellow at the Georgetown Center on Poverty and Inequality. Kali Grant is the Program Coordinator for the Project on Deep Poverty at the Georgetown Center on Poverty and Inequality. Melissa Boteach is the Vice President of the Poverty to Prosperity Program at the Center for American Progress. Claire McKenna is a Senior Policy Analyst with the National Employment Law Project. Judy Conti is the Federal Advocacy Coordinator with the National Employment Law Project.

Introduction and Summary

Unemployment insurance, or UI, has been a pillar of our nation’s social insurance system for 80 years. It is an essential ingredient for economic security, shared prosperity, and a stable economy. Designed as a partnership between the federal government and the states,1 it is a critical support for unemployed jobseekers: UI temporarily replaces a share of lost wages for unemployed workers while they search for a new job. To be eligible for UI benefits, workers must have sufficient earnings history, have paid into unemployment insurance via their employer’s payroll taxes,2 have lost a job through no fault of their own, and be actively seeking work.

UI protects families from hardship. But it also helps to stabilize the economy during downturns by boosting the spending power of struggling families and creating demand in the economy. In part because of significant, temporary improvements, the UI system once again proved to be essential during the Great Recession, both to family economic security and to our nation’s economic health. In 2009 alone, UI kept more than 5 million Americans out of poverty3 and saved more than 2 million jobs by boosting demand in a sagging economy.4 Between 2008 and 2012, UI prevented an estimated 1.4 million foreclosures,5 and from 2008 to 2010, it closed more than 18 percent of the shortfall in gross domestic product, or GDP.6

However, our nation has dramatically underinvested in UI and has failed to update this vital system for the 21st century. In 2015, only about one in four jobless workers received UI benefits at all—a historic low.7 This erosion of one of our nation’s most important social insurance programs is not only problematic for workers, it also leaves the U.S. economy severely underprepared for the next recession. Only twice since 1860 has the United States gone more than eight years without a downturn—and 2016 marks the seventh year of economic expansion.8 The next recession—while unpredictable—is inevitable, and experts are already pressing policymakers to prepare.9

To protect more working families from the risk and hardships of unemployment, policymakers should act now to fortify the nation against the next recession. America must ensure a robust employment, training, and income-security system for involuntarily unemployed workers by substantially strengthening UI. Further,our nation must also help the many jobseekers who will not qualify for traditional UI—even under a modernized UI system—to actively seek employment, connect to job opportunities, and improve their work-related skills.

To this end, the Center for American Progress, or CAP; the Georgetown Center on Poverty and Inequality, or GCPI; and the National Employment Law Project, or NELP, came together on a proposal to modernize the nation’s system for assisting unemployed jobseekers. This report proceeds in two distinct sections.

Section 1 proposes ambitious, but strongly needed, reforms to UI. This includes bolstering UI’s effective re-employment services to connect more jobseekers with workforce development opportunities and strengthening tools such as work sharing that help workers stay in the jobs that they already have. It includes detailed reforms to expand UI eligibility to reach more unemployed workers, improve the adequacy of UI benefits, and increase participation in the program. In addition, this section recommends reforms to UI’s financing that would improve the program’s solvency, as well as steps that would improve UI’s ability to respond to future recessions, including repairing the Extended Benefits program.

In Section 2, the report recommends the establishment of a new Jobseeker’s Allowance, or JSA, for workers who would remain ineligible for UI. This section describes the need for a modest, short-term benefit that would assist jobseekers such as unemployed independent contractors and those with limited work history. The report lays out eligibility criteria for the JSA, characterizes the moderate but important benefits and services the JSA would provide, and outlines the administration and financing of the proposed program. Finally, the report briefly describes the anticipated costs of the proposal, including both reforms to UI and the new JSA.

Rachel West is an Associate Director for the Poverty to Prosperity Program at the Center for American Progress. Indivar Dutta-Gupta is Director of the Project on Deep Poverty and Senior Fellow at the Georgetown Center on Poverty and Inequality. Kali Grant is the Program Coordinator for the Project on Deep Poverty at the Georgetown Center on Poverty and Inequality. Melissa Boteach is the Vice President of the Poverty to Prosperity Program at the Center for American Progress. Claire McKenna is a Senior Policy Analyst with the National Employment Law Project. Judy Conti is the Federal Advocacy Coordinator with the National Employment Law Project.